Companies and Brands

Blue Buffalo Gears Up for Secondary Offering

Chris Lange

Published: May 16, 2016 10:50 am

Last Updated: January 13, 2020 8:00 am

Blue Buffalo Pet Products Inc. (NASDAQ: BUFF) has registered an S-1 form with the U.S. Securities and Exchange Commission (SEC) for a secondary offering. The company will offer 25 million shares, with an overallotment option for an additional 3.75 million shares. At the most recent closing price $26.39, the entire offering would be valued up to $758.71 million.

The underwriters for this offering are JPMorgan, Citigroup, Barclays, Deutsche Bank, Morgan Stanley and Wells Fargo.

This is the fastest growing major pet food company in the United States, selling dog and cat food made with whole meats, fruits and vegetables, and other high-quality, natural ingredients. Blue is a billion dollar brand and is the top brand in the Wholesome Natural market segment.

The company currently has roughly a 6% share of the U.S. pet food market and feeds only 2% to 3% of the 164 million pets in the United States. With a proven new user acquisition strategy, Blue Buffalo is committed to converting more pet parents into True Blue Believers and continuing to increase its share of the attractive $27 billion U.S. pet food market.

In the filing, the company detailed its finances as follows:

Our net sales have grown from $190 million in 2010 to $1,027 million in 2015, which represents a compound annual growth rate, or CAGR, of 40%. During this period, our operating income grew from $15 million to $160 million, which represents a CAGR of 61%, while our net income grew from $23 million to $89 million, which represents a CAGR of 31%. Given the size and scale we have reached, we expect our growth rates to moderate in the future. We believe that only a few public U.S. CPG companies have our combination of scale, significant growth and strong margins. The following chart illustrates our growth in net sales, operating income and net income from 2005 to 2015. Our adjusted net income and net income for 2015 was $122.5 million and $89.4 million, respectively. See “Summary Consolidated Financial Data” for a reconciliation of net income to adjusted net income.

Blue Buffalo will not receive any proceeds from this offering. Instead they will go to the selling shareholders.

Shares of Blue Buffalo traded at $25.71 Monday morning, with a consensus analyst price target of $26.17 and a 52-week trading range of $15.19 to $28.80.